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August 06, 2014

By Barbara Kollmeyer, MarketWatch

Merger updates lift 21st Century Fox, batter Sprint

MADRID (MarketWatch) -- Failed merger news, geopolitical tensions and downbeat European economic news pushed U.S. stock futures into the red on Wednesday, potentially setting Wall Street up for another day of losses.

Just one piece of economic data from the U.S. is due, while shares of Groupon Inc., 21st Century Fox Inc., Sprint Corp. and Walgreen Co. were active in the premarket.

Futures for the Dow Jones Industrial Average (DJU4) fell 64 points, or 0.4%, to 16,304, while those for the S&P 500 index (SPU4) eased 7.1 points, or 0.4%, to 1,905.90. Futures for the Nasdaq-100 index (NDU4) tumbled 20.50 points, or 0.5%, to 3,851.25.

Trade deficit data for June will be released at 8:30 a.m. Eastern Time. Also on the economic front, Dallas Federal Reserve President Richard Fisher said after the close of Wall Street's session that the central bank may need to hike rates sooner than expected, if data continues to be as strong as the July Institute for Supply Management's service-sector index. The index reached the highest level since Dec. 2005 on Tuesday.

Also read: Here is when Fed officials forecast an interest-rate hike

European tension

Europe's economy may provide extra tension for Wall Street on Wednesday. Stock futures pushed into the red after news that Italy unexpectedly fell back into recession in the second quarter, as its gross domestic product shrank 0.2%.

Already rattled by Russia-Ukraine fears, the Stoxx 600 index fell 1.4%, while stocks in Italy sank 3%. Other data showed German manufacturing orders dropping a surprising 3.2% in June on an adjusted basis, as geopolitical worries held back orders. The German DAX 30 index dropped 1.5%.

Investor sentiment was already dented by Tuesday's selling action on Wall Street, driven by reports that Russia has dramatically lifted the number of troops and vehicles on its border with Ukraine in the past few days. Polish Foreign Minister Radoslaw Sikorsk said in a television interview on Tuesday that there were more than a "dozen battalion-sized combat groups" on that border, Bloomberg reported.

In addition, Russian President Vladimir Putin told his government to prepare retaliatory measures against sanctions by the U.S. and Europe. The DJIA closed down 0.8%, or 139.81 points, to 16,429.47, while the S&P 500 (SPX) dropped 1%, to 1,920.21, on Tuesday.

"With the Dow Jones brushing the 200-day moving average for the first time since the end of January, there will be a lot of nervous bulls out there," said Chris Beauchamp, market analyst at IG, in a note. (Read more on why stocks are down in Wednesday's Need to Know http://www.marketwatch.com/story/walgreen-to-buy-remaining-stake-in-alliance-boots-2014-08-06-61035145.)

Jitters carried over into Asia, where the Nikkei 225 index slid 1%. In other markets, Gold prices (GCU4) remained firm, while oil (CLU4) held steady ahead of inventory reports due later, and the dollar traded choppy.

Groupon, Time Warner, Sprint on the move

Shares of Groupon (GRPN) slid 17% in premarket after the daily-deals company posted disappointing results late Tuesday. Groupon may not be bargain stock it seems

Investors will be chewing over some failed merger news. 21st Century Fox Inc. (NWSA) said late Tuesday that it was yanking its proposal to buy Time Warner Inc. (TWX) after its approaches were rejected. 21st Century Fox also approved a $6 billion share buyback program, and shares rose 8% in late trading. Time Warner shares fell 11%.

Time Warner will report results ahead of the bell on Wednesday.

Sprint (S) also said it would end its pursuit of T-Mobile US Inc. (TMUS) and would replace Chief Executive Dan Hesse with billionaire entrepreneur Marcelo Claure, who is untested as a wireless operator, The Wall Street Journal reported. Sprint shares slid 20%.

And shares of Walgreen Co.(WAG) fell nearly 9% after the company said it will buy the remaining 55% of Alliance Boots GmbH that it doesn't already own. The drugstore also said it will keep headquarters in the U.S., news that will disappoint a group of investors trying to persuade the company to relocate its headquarters to tax-friendly Switzerland.

First Solar Inc. (FSLR) eased 4%after the solar-energy company posted an earnings fall late Tuesday.

Shares of Walt Disney Co. (DIS) inched lower. The company reported a 22% rise in fiscal third-quarter earnings, thanks in part to the animated blockbuster "Frozen."